Meandering Thoughts On An NFL-Free Thursday Night -- OCtober 26, 2017

I just googled, "NFL tonight" -- wow, this will keep the viewers tuned in. The score is 40 - 0.  I can't remember who is playing -- I guess one of the teams is the Dolphins. I can already hear the play-by-play announcers trying to keep viewers tuned in -- "If they can score on this drive, get an on-side kick and this is a game again." 

World events:

• something tells me "Rocket Man" and his minions are flummoxed by President Trump
• I can't wait to see if President Trump visits the DMZ; I hope he does; maybe even tweet from the DMZ
• Saudi Arabia: talk about being flummoxed; slow train wreck, losing $5 billion / month; strategies not working; 
• Iraq's star rising; Iran, back to square one with the US and world community
• Germany's Merkel: now she knows what quicksand feels like: slow and impossible to get out of

Energy:

• US breaking away from rest of world; US E&Ps targeting $27 oil
• US crude oil exports increasing, and yet US crude oil inventories increase -- so much for re-balancing
• we haven't heard about storage constraints at Cushing for quite some time now; despite rising inventories

Investors:

• value investors talk about looking for "value," but have become "momentum" investors
• growth investors are the new "momentum" investors
• I wouldn't put new money in Big Oil, Medium Oil, or Small Oil right now, but my hunch is that next summer (2018) I'm going to wish I had put new money into Big Oil, Medium Oil, and Small Oil
• tea leaves: Janet Yellen is re-appointed by President Trump for another four years
• stock pickers' market but market has the feel of the Golden Nugget for the first time in quite some time
• a lot of "accidental high dividend payers"
• GE will spin off one or two divisions
• investors have a four-year opportunity that they have not had in 16 years; but the opportunity will last only four years

Oil money

• CEOs, CFO, board directors doing very, very well
• roughnecks doing well but probably not as well as they were doing during the boom
• mineral owners with minerals in "sweet spots" are going to be shocked at how big their monthly checks are with pad drilling
• surface owners: monthly easement checks make life a bit better but still angry they don't have mineral rights
• North Dakota: will see Legacy Fund growing a bit faster in 2018 than in 2017
• investors in equity: doing really, really badly and wondering what happened
• did I forget anyone?

Culture

• music is still not as good as it was in 1969
• the "old" Apple phones are just as good as the "new" Apple phones and a whole lot less expensive
• folks will be underwhelmed by Tesla's Model 3
• YouTubeTV will scare the heck out of Spectrum, Comcast
• NFL-free Sundays will become the new mantra; with TV money, NFL will thrive; if Kaepernick gets a job, that will provide an excuse for the "kneelers" to stand once again; everyone will save face
• every male celebrity, every male journalist is waiting for their sexist past to catch up with them  

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The Art Page

Sophia, age 3.3 years old (3 years 4 month old)
Medium: water color
October 26, 2017
Title: Birds

Eagle Ford TOC -- October 26, 2017

From: AAPG, posted May 8, 2017:

The source of the Cenomanian to Santonian petroleum systems across East and South Texas has been attributed to the Eagle Ford Shale play.

However, little effort has been made to distinguish the relationship between the depositional settings, organic facies, oil families, and lithostratigraphic characteristics of the source rock.

This study finds that there are significant variations in stratigraphy, reservoir type, and produced hydrocarbon chemistry between the South Texas Eagle Ford and the so-called East Texas Eagle Ford.

The South Texas Lower Eagle Ford Shale reservoir facies is dominated by organic-rich, relatively low clay, foraminfera-rich, coccolith mudstones/marlstones, whereas the superficially equivalent source rocks in East Texas have a much more dominant terrestrial influence.

In a regional reservoir modeling study at the confluence of East Texas and South Texas on the San Marcos Arch, the interplay of these depositional systems had to be accounted for to achieve reliable results. The model included analysis of cores from multiple counties combining detailed stratigraphic facies descriptions and petrophysical data from the base of the Austin Chalk to the Buda Formation.

Source rock data is available from approximately 118 wells throughout this interval between the Austin Chalk and Buda. The dataset includes TOC, pyrolysis, and vitrinite reflectance data.

Based on TOC analyses across the entire trend, the average TOC of the East Texas and South Texas Eagle Ford is 3.43%.

Pyrolysis data and visual kerogen descriptions clearly show the South Texas Eagle Ford contains primarily Type II algae-rich oil prone kerogen. In contrast, the East Texas Eagle Ford contains type II kerogen with terrestrially derived mixed kerogen from the northeast.

Thermal maturity in the Eagle Ford play area varies systematically with structure independent of the depositional systems from early oil generation to dry gas trending northwest to southeast. Produced oil geochemistry data from 70 oils include bulk molecular compositions, Pristane/nC17, Phytane/nC18, Pristane/Phytane, C13 to C20 isoprenoids, saturate and aromatic carbon isotope compositions, sterane and hopane ratios.

The geochemical data suggest that the oils from the South Texas Eagle Ford and East Texas Eagle Ford plays are generated from two distinct types of organofacies. One type is dominantly carbonate mudstone sourced in South Texas, and the other type is siliciclastic marine shale sourced in East Texas.

See also: researchgate, January 6, 2016. TOC varies across the region, from 2% to 12%. The TOC increases from northeast to southwest.

API of crude oil across the US. Look how uniform the crude oil is in North Dakota compared to Texas; note how "heavy" California oil is compare to Texas and North Dakota.

The Political Page With A Bit Of Energy News, T+278 -- October 26, 2017

Vision 2030: looking a lot less clear. From the beginning, I've had my doubts about Prince Salman's "Vision 2030." See "The Salman Plan" linked at the sidebar at the right, under the "On-Going Section." Financial Times writes about current status of Prince Salman's plan. If behind a paywall, google u-turn to revive quotas is not working and fails to address changing future of oil ft. Data points:

• Saudi Arabia has moved into recession
• unemployment continues to rise
• the war in Yemen and the dispute with Qatar appear in stalemate
• vexed issue of King Salman's ill health; the question of who succeeds him (I thought that was settled; oh-oh)
• the article recounts Prince Salman's "trillion dollar mistake"
• but note this: in December, 2014, the number of drilling rigs had peaked at 353; by May, 2016, the figure had collapsed to just 116; now, the rig count has trebled and is close to a new peak, at 336
• even worse: oil production per Permian rig has continued to rise from December, 2014's, level of 219 b/d; volume has nearly trebled to 572 b/d while the number of DUCs has almost doubled from 1,204 to 2,330
• Saudi Arabia has taken most of the OPEC's total cuts
• Saudi Arabia forcast "re-balancing" would by achieved by March, 2018; now it might take until December, 2018, and require even further cuts
• much, much more at the link; too bad the writer did not show the monthly drop in Saudi's foreign reserves

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Jobs

First time unemployment claims:

• increased less than expected
• initial claims increased 10,000 to a seasonally adjusted 233,000; forecast for 235,000
• previous week, claims fell to 223,000, the lowest level since March, 1973
• 138th straight week that claims remained below the 300,000 threshold -- which is associated with a strong labor market; longest stretch since 1970 when the labor market was smaller
• jobless rate at more than a 16 1/2 year low of 4.2 percent
• moving average: fell 9,000 to 239,500

It's noteworthy that since Donald Trump, who campaigned on "jobs, jobs, jobs" has become president, the weekly jobs report is hardly noted by mainstream media unless there's been a huge change.

 

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Speaking of Challenges

NFL-free Thursdays? Networks want to cancel "Thursday Night Football." No link. Story everywhere, easily found. First reports from Breitbart and CBS.

WTI At $52.68; Statoil Looks At $27 Breakeven In The Eagle Ford -- October 26, 2017

Note: the Freedom Energy well targeting the Lodgepole southwest of Dickinson, #33997, has been updated at this post. 

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Breakeven Costs (Again)

Tea leaves: it's really, really "fun" to watch for "red flags" (good and bad) buried in long, long reports. I did not catch this the first I went through the earnings report, but look at the breakeven target that Statoil wants in the Eagle Ford in their "next generation" wells in the Eagle Ford: $27 oil. Is that far-fetched? Is anyone else talking about $30 oil? If one is paying attention, we talked about it  -- was it yesterday -- let's look: yes, here it is, yesterday: "Big Oil target: make money at $30-oil." -- Bloomberg

This has so many incredible implications -- making money at $30 oil. But time to move on.

Statoil earnings cal, 3Q17: link here. From Q&A:

Q: ... some of your competitors called things like train wreck wells with that tighter down spacing in Eagle Ford and whether there's some extra CapEx that will drop out and not be spent going forward?
A: ... on the well spacing and the change of CapEx, it's too early to conclude, we have changed the well spacing to a wider space of 500 feet
Q: ...related to the Eagle Ford downgrade, I think there's some concern in the market over your relatively low reserve life. I'm guessing that's going to fall further on the back of the Eagle Ford downgrade to reserves. So just how you're kind of thinking about that reserve life within that context as well?
A: (does not answer the question; too early to tell) ... In terms of reserve life, on a portfolio level, we like to talk about the next generation portfolio with an excellent breakeven, it's $27 on average, short payback time 2023, IRR 20%, you heard me say this before. So we're not worried about that. On Eagle Ford, this is part of what we are assessing based on the change and the improvement work we're doing.
Q: ... impairments
A: ...The largest impairment of $0.85 billion is specifically on Eagle Ford. This was triggered by lower than expected production volumes, but the impairment in itself is calculated based on our market valuation.
Q: ... impairments
A: ... So the history we're coming from is that both in this quarter and in previous quarters, we've had impairments and reversals. And the largest one in this quarter is Eagle Ford. So, this is due to the trigger of reduced production rates. As part of the industry, we started a year ago to do tighter well spacing 200 feet to 250 feet. We had great faith in this measure of course, so we actually reversed based on the plans and the indicative results, that didn't turn out to be as favorable as we hoped for. So we have, of course, stopped that practice and are changing it.
This is an Eagle Ford issue as it has been for the industry with tighter well spacing. So based on that, we did a valuation, third-party market assessment and we have started working out an improvement plan. So, we have moved from 200 feet to 250 feet well spacing to 500 feet. Very early days, too early to conclude, but the indicative result so far is in the positive direction. So, this is something we will come back to. So, as I said, there is uncertainty in valuation and reserves. So that's why we have these changes

From the blog, July 26, 2017 (link here):

I've also read that some operators in the Bakken can meet their 2017 contractual agreements in the first six months of the year. Anyone following "wells of interest" can understand why I say that "new" bbls in the Bakken are being lifted for a lot less than $28/bbl, using OXY's accounting methods.

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Back To The Bakken

Active rigs:

$52.68↑	10/26/2017	10/26/2016	10/26/2015	10/26/2014	10/26/2013
Active Rigs	53	36	68	194	182

Eight (8) new permits:

• Operators: Hess (6); BR; Ballard Petroleum
• Fields: Blue Buttes (McKenzie); Camel Butte (McKenzie); Wildcat (Bottineau)
• Comments: Hess has permits for a 6-well BB-Chapin pad in section 5-151-95

CLR renewed four permits:

• CLR: two Charlotte permits; one Chicago permit; and, one Akron permit, all in McKenzie County

Five permits canceled:

• EOG (3): two Mandaree permits and one West Clark permit, all in McKenzie County
• HRC: one Fort Berthold permit, in McKenzie County
• Oasis: one Crane Federal permit in Williams County

One DUC reported as completed:

• 33499, 593, Oasis, Osprey5401 44-23H, Todd, t10/17; cum --

Gasoline Demand -- Lookin' Good -- October 26, 2017

Google: huge report; jumps 4% after hours, after earnings reported; back above $1,000/share; and CNBC quickly finds things to worry about with regard to Google; EPS $9.57/share; vs $7.25/share a year earlier. Huge. Revenue at $27.77 compared to $22.45 a year earlier.

Amazon: revenue higher than expected; growth huge year-over-year; 52 cents; huge beat on the bottom line. CNBC completely surprised; now CNBC now trying to explain it; "not a managed numbers; a real number"; now trading above $1,000/share again; some talking head thinks it might be due to Whole Foods acquisition; I doubt it; if anything Whole Foods would be a drag; another analyst suggests the Amazon numbers are "awesome";

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Gasoline Demand

From the EIA, a dynamic link:

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The Market

Marathon Petroleum 3Q17 earnings beat as margins soar! EPS at $1.77 vs estimate of $1.45. Refining margin of $14.14/bbl vs $11.32 previous quarter and $10.67 a year ago. Whoo-hoo.

UNP: 3Q17 profit grows 6% despite challenges.  EPS of $1.50/share, up from $1.36 a year ago, despite Hurricne Harvey. Estimates at $1.49.

NYSE, new highs, 175 183, including -- BAX (whoo-hoo!); D. R. Horton (again); JPM;

• new lows: 78 83, Baker Huges a GE (BHGE); Chesapeake Energy (CHK), EPD and ETP; GE; PAA -- looking at the new lows, the energy sector not looking good

COP transcript.

Wow, Wow, Wow -- Not Previously Reported -- A Statoil Cheryl Well -- October 26, 2017

There is no sundry form to suggest this well was re-fracked. FracFocus has no data to suggest this well was re-fracked.

Many wells in the area were fracked about the time this well had a jump in production starting in June, 2017.

I will provide details later.

Here is the production profile for a well that was originally fracked in 2013 and not re-fracked.

This well, prior to January, 2017, was producing around 36,000 bbls/year. After May, 2017, this well produced 43,933 bbls in slightly less than three months. The well was taken off-line for about four months. 

The well:

• 22808, 4,439, Statoil, Cheryl 17-20 4H, Banks, t2/13; cum 352K 8/17; 

Monthly Production Data:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	8-2017	31	10663	10901	11776	30569	30479	59
BAKKEN	7-2017	31	16776	16619	15139	35450	33826	1593
BAKKEN	6-2017	27	16494	16059	20259	33466	30373	3066
BAKKEN	5-2017	31	0	0	0	0	0	0
BAKKEN	4-2017	0	0	0	0	0	0	0
BAKKEN	3-2017	1	1509	1797	0	0	0	0
BAKKEN	2-2017	0	0	0	0	0	0	0
BAKKEN	1-2017	31	30	436	0	0	0	0
BAKKEN	12-2016	11	2587	2936	4580	4722	4708	0
BAKKEN	11-2016	30	4018	3695	9898	7252	7221	1
BAKKEN	10-2016	31	3257	3242	10527	5403	5403	0
BAKKEN	9-2016	30	2894	2611	10589	4650	3857	793
BAKKEN	8-2016	1	138	0	686	32	32	0
BAKKEN	7-2016	0	0	0	0	0	0	0
BAKKEN	6-2016	0	0	0	0	0	0	0
BAKKEN	5-2016	0	0	0	0	0	0	0
BAKKEN	4-2016	0	0	356	0	131	131	0
BAKKEN	3-2016	31	2892	2873	2241	6119	6092	27
BAKKEN	2-2016	29	3413	3392	2391	8587	8547	40
BAKKEN	1-2016	31	4346	4504	2542	11422	11242	180
BAKKEN	12-2015	27	3712	3460	2044	9272	8530	742
BAKKEN	11-2015	30	4197	4140	2392	11258	11203	55
BAKKEN	10-2015	31	4723	5074	2879	11481	11329	152
BAKKEN	9-2015	21	3398	2796	1606	7461	6835	626
BAKKEN	8-2015	30	3328	3654	2571	8340	8060	280
BAKKEN	7-2015	23	2258	2403	2254	6244	5881	363
BAKKEN	6-2015	30	4264	4258	2621	17382	16596	786
BAKKEN	5-2015	31	4954	4970	1701	20581	20352	229
BAKKEN	4-2015	30	2425	2427	2810	21756	20048	1708
BAKKEN	3-2015	31	5469	5533	3414	28905	27991	914
BAKKEN	2-2015	28	5554	5857	3055	28434	24102	4332
BAKKEN	1-2015	31	7657	7639	3776	34667	27472	7195
BAKKEN	12-2014	31	7159	6810	2401	16906	15775	1131
BAKKEN	11-2014	30	5669	6062	1675	9604	9602	2
BAKKEN	10-2014	19	5492	5241	3382	4012	3977	35
BAKKEN	9-2014	30	8090	8630	6239	21814	21540	274
BAKKEN	8-2014	26	7454	6291	3208	13450	12227	1223
BAKKEN	7-2014	27	6061	7053	2783	11077	7396	3681
BAKKEN	6-2014	24	6275	6478	2788	14828	13045	1783
BAKKEN	5-2014	31	10014	9814	7942	29864	24832	5032
BAKKEN	4-2014	30	8729	8377	3327	19631	19558	73
BAKKEN	3-2014	31	11038	10944	4300	32306	30434	1872
BAKKEN	2-2014	28	12378	12310	5069	38670	30896	7774
BAKKEN	1-2014	31	19023	19207	6900	51388	37200	14188
BAKKEN	12-2013	31	12514	12632	3732	28375	24409	3966
BAKKEN	11-2013	30	6096	6579	5766	37756	35250	2506
BAKKEN	10-2013	31	10738	11324	3324	18810	18643	167
BAKKEN	9-2013	30	12134	11518	4070	930	0	930
BAKKEN	8-2013	31	10625	10965	3364	4803	0	4803
BAKKEN	7-2013	31	9840	9043	3467	11099	0	11099
BAKKEN	6-2013	30	7655	8414	3290	8451	0	8451
BAKKEN	5-2013	2	870	0	509	844	0	844
BAKKEN	4-2013	0	0	0	0	0	0	0
BAKKEN	3-2013	25	17528	18309	6609	26283	0	26283
BAKKEN	2-2013	26	35709	34060	26746	69146	0	69146

Not Ready For Prime Time -- Probably Shouldn't Be Posted -- October 26, 2017

Updates

Later, 2:30 p.m. Central Time: see first comment. Reader is exactly right. When I get time I will expand on this.

Original Post

It is generally accepted that in the better part of the Bakken we will eventually see as many as 32 wells in each drilling unit of 1280 acres. Of course, this is all predicated on the economics. The Saudis have recently suggested that American shale operators will "eventually" run out of "Tier 1" drilling locations.

Much of the Parshall oil field would be considered a Tier 1 oil field in the Bakken. The western half of the Parshall oil field appears to be "better" than the eastern half.

Earlier I posted this graphic (this is in the eastern half of the Parshall). At the link, note that a short lateral, using old completion strategies, drilled back at the beginning of the boom ten years ago, has already produced almost a half-million bbls of oil.

Note the sparsity of wells in this area. Again, remember, it is generally accepted that in the better part of the Bakken we could see as many as 32 wells in each drilling unit. The graphic above is in the eastern half of the Parshall, generally considered not as good as the western half which is an incredibly good area (but not the best in the Bakken).

Now, let's zoom out a bit, but staying in the Parshall. I'm staying in the Parshall because some folks have told me that the Parshall is nearing its "saturation point" as far as any new infill drilling will occur.

In the graphic below I've tried to note the number of wells in actual and hypothetical 1280-acre drilling  units. I say "hypothetical" because many Parshall wells are short laterals (640-acre spacing). In each section below (640 acres), I note the number of horizontals passing through as if they were were 1280-acre spacing. It's very, very inaccurate but it gives me an idea of how many horizontals are actually in any given or hypothetical 1280-acre drilling unit. In some "boxes" I have estimated on the high side; in other "boxes" I have estimated on the low side. It was done quickly and without a lot of thought.  And, yes, I have an agenda. And there are other errors. Everyone will have their own estimates.

But in the big scheme of things it gives me an idea of how many more wells are left to be drilled if we are going to show 16 wells in each box (or 32 wells/1280-acre drilling unit).

I suppose a much better way, in hindsight, would have been to simply count the number of sections in the graphic and then count the number of wells and extrapolate from there. That would have been much more accurate.

So this is really not ready for prime time. There were better ways to do do this, but it is what it is.

The graphic:

Compare the Parshall graphic above to a portion of the Grail oil field. The Grail oil field is much farther along than the Parshall, but even still, the Grail is averaging about 8 horizontals per 1280-acre drilling unit, a long way from 32 wells / drilling unit.

If the Saudis are relying on American oil companies to run out of Tier 1 drilling locations, they may have a long wait at $50 oil. At $60, the wait gets longer. At $70, the wait gets even longer. No one expects oil to hit $70 before the end of 2018.

Random Update Of EOG's Westgard Well In The Parshall -- October 26, 2017

Production data will not be updated at this post; production will be updated elsewhere.

The well:

• 17277, 1,594, EOG, Westgard 1-28H, Parshall, API - 33-061-00743, t5/10; cum 340K 8/17; no FracFocus data that well was refracked; neighboring well #30855 recently fracked; see production profile for wells below the graphic. Note: this is a short lateral.

The graphic:

Recent production for #17277:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	8-2017	31	3479	3443	1449	1260	1008	0
BAKKEN	7-2017	31	4239	4209	1780	1208	898	60
BAKKEN	6-2017	30	4960	5060	2062	1315	815	256
BAKKEN	5-2017	31	6230	6248	2172	1513	1071	190
BAKKEN	4-2017	30	6111	6077	2232	1261	87	937
BAKKEN	3-2017	31	7189	7099	2370	1469	319	898
BAKKEN	2-2017	28	5612	5615	2855	1205	354	623
BAKKEN	1-2017	31	6453	6449	3524	1418	496	670
BAKKEN	12-2016	29	5895	6071	3538	1268	289	752
BAKKEN	11-2016	26	5885	5737	2948	1383	1159	19
BAKKEN	10-2016	13	4183	4061	2994	850	713	35
BAKKEN	9-2016	0	0	0	0	0	0	0
BAKKEN	8-2016	2	3	140	27	15	2	2
BAKKEN	7-2016	31	1312	1203	116	447	193	2
BAKKEN	6-2016	30	1278	1279	118	455	205	6
BAKKEN	5-2016	31	1402	1406	129	515	230	33

Neighboring well, recently fracked:

• 30855, 1,086, EOG, Shell 30-2820H, Parshall, t10/16; cum 167K 8/17;

Other wells of note in the graphic above:

• 30856, 774, EOG, Shell  29-2820H, Parshall, t10/16; cum 87K 8/17;
• 30781, 1,211, EOG, Shell 23-2820H, Parshall, t10/16; cum 138K 8/17;
• 30469, 1,203, EOG, Shell 22-2820H, Parshall, t10/16; cum 89K 8/17;

Other wells outside the index section in graphic above:

• 16534, 1,204, off-line as of 8/17; EOG, Wentz 1-29H, t5/08; cum 450K 8/17; note; this is a short lateral -- extrapolating to a long lateral, this well would have produced almost a million bbls in less than 10 years
• 16799, 307, EOG, Patten 1-27H, t3/08; cum 114K 8/17; a canditate for re-frack;

Random Update Of A BR CCU Dakotan Well, Corral Creek -- October 26, 2017

This is being posted here as well as elsewhere. Production data will be updated elsewhere, not at this post.

Let's take a look at a recently reported DUC now that the neighboring wells have been put back on-line.

The DUC:

• 32330, 1,008, BR, CCU Dakotan 8-2-16 TFH, t3/17; cum 78K 8/17; (30092, 30091, 30090, 30089)

The neighboring wells that we will look at: 30092, 30091, 30090, 30089

The graphic:

The newly fracked well:

• 30092, 2,664, BR, CCU Dakotan 7-8-17MBH, Corral Creek, API - 33-025-02773, t9/15; cum 229K 8/17; according to FracFocus, fracked 8/16/2015 - 8/19/15; no data for a re-frack;

Production profile for #30092, an existing well (note that #32330 was fracked in early 2017):
Recent Monthly Production Data:

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	8-2017	4	809	766	801	1301	1289	0
BAKKEN	7-2017	0	0	91	0	0	0	0
BAKKEN	6-2017	10	3384	3390	4039	4554	4179	346
BAKKEN	5-2017	11	3534	3776	3967	5263	5230	0
BAKKEN	4-2017	30	15740	15775	18233	24066	23982	0
BAKKEN	3-2017	25	13079	12711	13785	16399	12205	4122
BAKKEN	2-2017	1	111	105	80	301	298	0
BAKKEN	1-2017	0	0	248	0	0	0	0
BAKKEN	12-2016	26	6351	6222	3601	9109	6907	2128
BAKKEN	11-2016	30	8054	8077	5425	14881	11791	3007
BAKKEN	10-2016	27	9863	9879	5922	26245	26170	0

The other wells of note:

• 30091: still off-line, IA; has been off-line since 1/17
• 30090: off-line while 32330 was being fracked; a great well; no halo effect
• 30089: off-line while 32330 was being fracked; another great well; no halo effect

The Market And Energy Page, Part 2, T+278 -- October 26, 2017

Futures: Dow 30 futures up about 50 points.

WTI: $52.26. Flat.

Xilinx: 2Q17 earnings beat; revenues in line. Shares slump.

The Political Page, T+278 -- October 26, 2017

Updates

Later, 3:11 p.m. Central Time: see comments -- a reader didn't necessarily disagree with me nor was he an apologist for Germany with regard to their energy problems but .... And then a reader sent a link to this article: BNP Paribas ends funding of oil and natural gas companies. The bank says it will stop working with oil and gas firms involved in shale or oil sands as it looks to finance green energy startups. This validates my world view that the EU continues to commit energy suicide. But it's a conscious decision.

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Original Post

Hardly any fanfare ... so far: JFK assassination tapes to be released today. We should start seeing stories over the weekend and into next week.

Another one bites the dust: a regular over at "Talking Joe" won't be talking with Joe for awhile -- at least not on air. Five women accuse highly-acclaimed journalist Mark Halpern of sexual harassment; he confesses; "steps back" from day-to-day work. He says he "now understands" -- yes, I bet he does.

The list grows. No links. Stories everywhere.

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Germany

One could devote a whole blog to Germany's energy problems. A reader has sent me a number of links to various articles showing how bad things really are (and getting worse) in Germany. I read a fair amount of material on Germany's energy challenges late last night. But this data point jumped out at me, buried in a very technical journal touting the success Germany is having with its renewable energy program (wink, wink):

About 90% of hard coal was imported, in comparison with 98% import dependence for oil and 90% for natural gas.

Imagine if Hillary had been elected, and then served two full terms, and banned fracking as she promised during her campaign, and put a lot of miners out of work, as she also promised -- what would the US look like if US energy needs were those of Germany? What would the US look like if the US imported 98% of its oil, 90% of its natural gas, 90% of its hard coal? Wow. Not a pretty picture. But I digress. The bigger story is what is Germany going to look like five years from now? Or 15 years from now. This is how the German coal sector answer that question (see if you can spot the insanity in the following graph -- hint: there is more than one answer):

It was a bit difficult wading through all the data but it appears that not only will Germany require more coal than expected, but that Germany will have to rely on "dirtier" coal: lignite.

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Another Snowflake

Jeff Flake's "resignation" speech was pathetic. This had nothing to do with "integrity." He knew he was going to lose in the primary. Losing in a primary -- at this point in life -- unless he was a "phoenix-like Richard Nixon" -- would have been the end of his political career.

Born in Snowflake, Arizona, he is living up to his namesake and his birthplace, something I've not seen before. But I digress.

His entire life, except for fulfilling a two-year Mormon missionary mandate has been in politics. Losing a primary race now would have pretty much ended his political career. By retreating now, to fight again another day, allows him to re-build, and then run for president in 2020. Perhaps a Corker-Flake ticket. I can see the slogan now: "Put a cork in it. Be a flake. Vote Corker-Flake." He won't come close to winning but if Trump is knocked out, Flake positions himself for some high government position, perhaps Secretary of Defense. Or HUD.

Which reminds me of a joke our oldest granddaughter told me last night. Two brothers took divergent paths: one went to sea; the other became vice president of the US. Neither was ever heard of again.

Something tells me Flake won't disappear. My hunch is he writes a book, "Profiles in Courage for the 21st Century."

You can say a lot of things about Trump, but he's not a quitter. That's how Flake's resignation speech sounded to me. A quitter.

COP's EPS Double What Analysts Forecast; At $50 Oil; More Talk Of Natural Gas Pipeline Constraints -- October 26, 2017 -- Venezuela To Default By This Weekend? Big Oil Target: Make Money At $30-Oil

Ford shares jump 1.5% pre-market as earnings blow through estimates -- 39 cents/share vs 24 cents/share a year earlier. Adjusted, 46 cents beat by a wide margin the consensus of 33 cents. This is the important take-away:

• the 1.5% is a non-story
• the big story is this: another US success story -- making America great
• for the past three months, nothing but concerns about how Ford might be doing
• folks wouldn't be buying cars, SUVs, trucks if they weren't optimistic; if the economy wasn't doing well
• this story: reflects the health of the US economy
• remember: GM had great quarter also; link here; cost-cutting; shift to higher-margin trucks and SUVs; shares jumped to record high; reduced glut; blew through estimates; $1.32 vs forecast of $1.14;
• in the case of the automakers, U.S. car and light truck sales have so far defied predictions of a significant slump. September sales hit the fastest pace in 12 years as residents of Texas and Florida rushed to replace cars damaged by storms

Texas Two-Step: two huge Texas companies set to merge. Vistra Energy nears deal to buy Dynegy.  Each company has enterprise values north of $10 billion; may announce a deal as soon as next week.

Russia: ready to exit "production pact deal" with OPEC if pact not extended. Saudi indicates they will push for extension of pact through end of 2018; most of OPEC seems to agree.

Big Oil set to make "Facebook"-level cash with $50 oil: from Bloomberg. 

Crude may still be languishing near $50, but Big Oil is on track to rejoin the world’s corporate elite by squeezing more cash from each barrel.

The five biggest oil producers generated about $34 billion of cash from operations in the third quarter, according to estimates from Jefferies LLC. That puts each of them at least on a par with tech giant Facebook Inc., a welcome return to the top tier of global business after three years on the skids.

The oil majors are reaping the benefits of deep cost cuts, but they’re still not doing quite enough. The target: being able to fully fund dividends and investments at $40, or even $30 a barrel.

“It’s not peak diet yet,” said Dudley, who sees potential for even more stringent cost and spending discipline. “Our industry is going through a great, massive change in the cost structure.”

Total SA, Exxon Mobil Corp. and Chevron Corp. are scheduled to announce results on Oct. 27, BP on Oct. 31 and  Royal Dutch Shell Plc two days later. Here are five things to look out for in third-quarter earnings.

COP: 3Q17 EPS of 16 cents beats by 8 cents. Or another way to put it, earnings per share double  what analysts forecast. Double. More at SeekinagAlpha.

Hess: shares fall on "slashed" guidance for 4Q17.

Whiting: quarterly loss shrinks as oil prices rise. The loss this quarter: 79 cents/share; same period one year ago, $2.47. Whiting posted a third-quarter net loss of $286.4 million, or 79 cents per share, compared with $693.1 million, or $2.47 per share, in the year-ago period. See this post, also.

Excluding one-time items, including taxes and hedging gains, Whiting lost 14 cents per share. By that measure, analysts expected a loss of 20 cents per share, according to Thomson Reuters I/B/E/S. Slides here. Whiting reports 3Q17 earnings:

• EPS: a loss of 14 cents but beats by 6 cents
• revenue: misses by $1.96 million

Whiting Petroleum Corp, the largest oil producer in North Dakota's Bakken shale formation, posted a quarterly loss on Wednesday that was smaller than analysts had expected, due in part to higher crude prices.

The results came the day after Whiting said long-time Chief Executive James Volker would retire and be replaced by Brad Holly, a former Anadarko Petroleum Corp executive.

Whiting carries a debt load that eclipses its market value, and has struggled in recent years to capitalize on its position as a Bakken leader.

• Press release here:
• average production: 114,350 boe/d
• new McKenzie County Koala wells tracking 1.5 million boepd type curve (previously posted)
• new Williams County Nelson wells tracking 1.5 million boepd type curve (previously posted)

Active rigs:

$52.17→	10/26/2017	10/26/2016	10/26/2015	10/26/2014	10/26/2013
Active Rigs	54	36	68	194	182

RBN Energy: is the US gas market headed for more oversupply, pipeline constraints? At least for me, what the headline implies is absolutely staggering for me. Absolutely staggering.

Midstreamers in recent years have been in overdrive to de-bottleneck the Marcellus/Utica natural gas supply region as well as other growing gas supply basins and connect producers to where the demand is increasing. Significant transportation capacity has been added in recent years and much more is on the way.

Constraints are starting to ease and producers are finding relief. But with production growing again, there are signs of potential new bottlenecks on the horizon. The RBN Growth Scenario estimates that Lower-48 gas production could increase to 92 Bcf/d by 2022. Demand is expected to grow too — primarily from exports — but no more (and potentially less) than supply in the same timeframe, leaving the market in a precarious equilibrium over the next five years.

Thus, it will be all the more critical that incremental supply can access what new demand there will be. At the same time, demand growth will be concentrated in one geographic region — in the Gulf Coast states. In today’s blog, we explore the potential risks of overproduction as producers crank up drilling activity.

As we covered in Part 1, after slumping in 2016, both U.S. crude oil and Lower-48 natural gas production are climbing again. At the current price level near $50/bbl — our Cutback Scenario — the RBN Production Economics and Production Forecasting Models indicate that crude production would grow to 10 MMb/d by 2022. If prices climb to $57/bbl — RBN’s Growth Scenario — production would increase to 11.2 MMb/d by 2022. But if prices increase to $65/bbl — as in our Advance Scenario — crude production could rise to 12.5 MMb/d in five years’ time. Invariably, the incremental crude production will bring with it associated natural gas production.

Venezuela: watch for a lot of stories over the next few days about Venezuela defaulting over the weekend or next week. Start here. More than $2 billion due over the next several days.